JAPANESE SNACK SUBSIDIARY VERSUS AMERICAN MARKET FROM NICHE TO MAINSTREAM Xiaoxu Zhuang 17300680252 Course: English for Academic Purpose(Business) Date: 21 December. 2018
1 JAPANESE SNACK SUBSIDIARY VERSUS AMERICAN MARKET: FROM NICHE TO MAINSTREAM Xiaoxu Zhuang 17300680252 Course: English for Academic Purpose (Business) Date: 21 December, 2018
Part 1: Summary of the case material Kenko, the largest producer of rice crackers in Japan, possessing 1 billion dollars in domestic sales. has launched its subsidiary Kenko USa into american market six years ago to fulfill its international expansion plan. Unfortunately, unsatisfactory sales results proved that the company did not take off as hope. Riku, head of Kenko USA, feeling worried about his performance, wants to head back to Japan with his family because of homesickness and his daughter's growth environment Recently, a national grocery chain named Pattys Pantry has approached Kenko USa about a deal to produce a private label line, which means Kenko's crackers would be sold under Patty's branding. Opinions on partnership were divergent within the management. Riku and his boss at headquarters, Fusao Saito, worried that it would damage its own brand image while Rebecca, Riku's assistant, regarded it as a golden opportunity to boost its sales Apart from this, Riku felt disappointed about the inability to move its products display position to a more competitive one in retailers, owing to insufficient demand. Riku is now in a dilem about slotting fee. On one hand, it does help make its crackers more popular. On the other hand, expensiveness and probable disapproval from his superiors discourage him from taking a further Part 2: Identification of the problem Facing such an unsatisfactory sales results, Kenko USA is in urgent need to break the deadlock and continues its own development. Thereby the core question, is how to make its products from niche to mainstream, based on the companys current situation. To better address the problem, it is necessary to divide it into two stages following the chronological order. In the near future, Kenko USA should focus on the cooperation with Patty's Pantry In addition, winning back his bosses support is another concern for Riku. From the long-term perspective, gradually gaining revenue and even prospering in the U.S. market is the ultimate aim of the company Part 3: Assessment of case information
2 Part 1: Summary of the case material Kenko, the largest producer of rice crackers in Japan, possessing 1 billion dollars in domestic sales, has launched its subsidiary Kenko USA into American market six years ago to fulfill its international expansion plan. Unfortunately, unsatisfactory sales results proved that the company did not take off as hope. Riku, head of Kenko USA, feeling worried about his performance, wants to head back to Japan with his family because of homesickness and his daughter’s growth environment. Recently, a national grocery chain named Patty’s Pantry has approached Kenko USA about a deal to produce a private label line, which means Kenko’s crackers would be sold under Patty’s branding. Opinions on partnership were divergent within the management. Riku and his boss at headquarters, Fusao Saito, worried that it would damage its own brand image while Rebecca, Riku’s assistant, regarded it as a golden opportunity to boost its sales. Apart from this, Riku felt disappointed about the inability to move its product’s display position to a more competitive one in retailers, owing to insufficient demand. Riku is now in a dilemma about slotting fee. On one hand, it does help make its crackers more popular. On the other hand, expensiveness and probable disapproval from his superiors discourage him from taking a further step. Part 2: Identification of the problem Facing such an unsatisfactory sales results, Kenko USA is in urgent need to break the deadlock and continues its own development. Thereby the core question, is how to make its products from niche to mainstream, based on the company’s current situation. To better address the problem, it is necessary to divide it into two stages following the chronological order. In the near future, Kenko USA should focus on the cooperation with Patty’s Pantry. In addition, winning back his bosses' support is another concern for Riku. From the long-term perspective, gradually gaining revenue and even prospering in the U.S. market is the ultimate aim of the company. Part 3: Assessment of case information
Based on the conditions faced by Kenko USA, it is imperative to adopt corresponding measures to solve the existing problems. Therefore, the marketing theory of 4Ps, a common analytical tool that classifies variables about the situation into certain types-product, price, place, promotion, can be properly applied to study this case 3. 1 Product analysis Rice cracker, also known as Senbei, is a kind of savory snack that are sometimes sweet Compared to other brands, Kenko's products have two relative merits: healthy concept and unique flavor. Gluten-free ingredients of Kenko's rice crackers perfectly cater to groups who are health and fitness concerned. Moreover, the unique flavor could better differentiate itself from numerous brands of snack and become popular among the younger generation. As a result, using consumer psychology and spearheading them as the consumer group could better expand the influence. For example in China, " Guliguli, a kind of drink that used to be popular over the past few years created a completely new type of beverage by using grain as its main ingredient. Instead of focusing solely on its advantages, Kenko USA should notice the fact that unfamiliar wasabi flavor easily declines Americans'willingness to buy. What s worse, the lack of English brand name and instructions on the package also reduce the customers' purchasing propens 3.2 Price analysis Due to the increasing popularity of on-the-go" lifestyles, americans are searching for snacks to fill their stomach between meals, which creates a huge demand for snack production. According to statistics, over 3000 new types of snacks were introduced in the U.S. in 2016. Great demand has consequently brought huge market growth. Among such a competitive industry, positioning Kenko USA itself as a premium snacks producer is quite necessary. Superior quality and medium-price are two main characteristics of premium snack. The assumption that price is the key factor for consumers no longer applies to modern society. In fact, global Premiumization Report found that 40% of shoppers said they expect to pay a premium for healthy and functional snacks. Health is 2惠尔康公司/ Huierkang Company," Company Overview"htt:/ vww hek. cn/ about2113htm, accessed november2018 2 FMCG AND RETAIL, "Individual Snacking Categories On the Rise In the U. S, "November 22, 2017, Nielsen Newswire https://www.nielsen.com/us/en/insights/news/2017/individual-snacking-categories-on-the-rise-in-the-us.htmlaccessed November 2018 3joHnOwen.,"uSSaltySnacksMarketReport"fooDandDRink(march2018),MintelResearch,inc.,https://Store.mintel.com/us- salty-snacks-market-report, accessed November 2018 Joanna Parman,"When It Comes to Snacks, Premium Is More Than Price, August 30, 2018, Nielsen Newswire, https://www.nielsen.com/us/en/insights/news/2018/perspectives-when-it-comes-to-snacks-premium-is-more-thar accessed November 2018
3 Based on the conditions faced by Kenko USA, it is imperative to adopt corresponding measures to solve the existing problems. Therefore, the marketing theory of 4Ps, a common analytical tool that classifies variables about the situation into certain types—product, price, place, promotion, can be properly applied to study this case. 3.1 Product analysis Rice cracker, also known as Senbei, is a kind of savory snack that are sometimes sweet. Compared to other brands, Kenko’s products have two relative merits: healthy concept and unique flavor. Gluten-free ingredients of Kenko’s rice crackers perfectly cater to groups who are health and fitness concerned. Moreover, the unique flavor could better differentiate itself from numerous brands of snack and become popular among the younger generation. As a result, using consumer psychology and spearheading them as the consumer group could better expand the influence. For example in China, “Guliguli”, a kind of drink that used to be popular over the past few years, created a completely new type of beverage by using grain as its main ingredient1 . Instead of focusing solely on its advantages, Kenko USA should notice the fact that unfamiliar wasabi flavor easily declines Americans’ willingness to buy. What’s worse, the lack of English brand name and instructions on the package also reduce the customers’ purchasing propensity. 3.2 Price analysis Due to the increasing popularity of “on-the-go” lifestyles, Americans are searching for snacks to fill their stomach between meals, which creates a huge demand for snack production2 . According to statistics, over 3000 new types of snacks were introduced in the U.S. in 20163 . Great demand has consequently brought huge market growth. Among such a competitive industry, positioning Kenko USA itself as a premium snacks producer is quite necessary4 . Superior quality and medium-price are two main characteristics of premium snack. The assumption that price is the key factor for consumers no longer applies to modern society. In fact, global Premiumization Report found that 40% of shoppers said they expect to pay a premium for healthy and functional snacks. Health is 1 惠尔康公司/Huierkang Company, “Company Overview,” http://www.hek.cn/about_21_13.htm, accessed November 2018. 2 FMCG AND RETAIL, “Individual Snacking Categories On the Rise In the U.S,” November 22, 2017, Nielsen Newswire, https://www.nielsen.com/us/en/insights/news/2017/individual-snacking-categories-on-the-rise-in-the-us.html, accessed November 2018. 3 John Owen.,”US Salty Snacks Market Report,” Food and Drink (March 2018), Mintel Research, Inc., https://store.mintel.com/ussalty-snacks-market-report, accessed November 2018. 4 Joanna Parman, “When It Comes to Snacks, Premium Is More Than Price,” August 30, 2018, Nielsen Newswire, https://www.nielsen.com/us/en/insights/news/2018/perspectives-when-it-comes-to-snacks-premium-is-more-than-price.html, accessed November 2018
gradually turning to a key part of the snacking agenda in order for corporations to succeed in marketing to their consumers 3.3 Place anal Nowadays competition in the retailing industry is getting increasingly fierce. To grow sales and maintain the edge, it is crucial for Kenko USa to handle its relationship with retailers appropriately Based on RT-Mart's report, the sales of the same product would usually differ largely due to their different display positions. In general, the sales of the commodities within the consumers'line of sight would be higher than those without. But a more obvious display position simultaneously means the option of paying a higher slotting fee which would aggravate Kenko USAs financial burden 3.4 Promotion analysis Usually, there are two ways to stimulate a company's sales result. The first one is to maintain its existing customers'loyalty. It requires the company to assure its regular customers a certain amour of benefits. For example, they could get a special discount via signing up as a member of Kenko The other one is to grab a larger portion of the market share. On the contrary, it requires the ompany to come up with creative ideas to draw new customers'attention Distributing more sampling and holding free foretaste activities are two typical measures that might be carried out commonly. Besides, celebrity endorsements would motivate large quantities of fans to purchase the products they advertised Part 4: Solutions and justification The analysis above shows that there are plenty of aspects that the company could improve upon In fact, four of them concluded from the marketing theory of 4ps are the top priority to Kenko USA First, referring to Pattys Pantry issue, it is strongly recommended to consider the cooperation because of several benefits. Despite the fact that it might damage the establishment of Kenko s own brand temporarily, the $4.5 million order could effectively help Kenko boost its sales and overcome Rt-mArtCompany,"companyOverviewhttp://www.rt-mart.com.cn,accessedNovember2018
4 gradually turning to a key part of the snacking agenda in order for corporations to succeed in marketing to their consumers. 3.3 Place analysis Nowadays competition in the retailing industry is getting increasingly fierce. To grow sales and maintain the edge, it is crucial for Kenko USA to handle its relationship with retailers appropriately. Based on RT-Mart’s report, the sales of the same product would usually differ largely due to their different display positions.5 In general, the sales of the commodities within the consumers’ line of sight would be higher than those without. But a more obvious display position simultaneously means the option of paying a higher slotting fee which would aggravate Kenko USA’s financial burden. 3.4 Promotion analysis Usually, there are two ways to stimulate a company’s sales result. The first one is to maintain its existing customers’ loyalty. It requires the company to assure its regular customers a certain amount of benefits. For example, they could get a special discount via signing up as a member of Kenko. The other one is to grab a larger portion of the market share. On the contrary, it requires the company to come up with creative ideas to draw new customers’ attention. Distributing more sampling and holding free foretaste activities are two typical measures that might be carried out commonly. Besides, celebrity endorsements would motivate large quantities of fans to purchase the products they advertised. Part 4: Solutions and justification The analysis above shows that there are plenty of aspects that the company could improve upon. In fact, four of them concluded from the marketing theory of 4Ps are the top priority to Kenko USA. First, referring to Patty’s Pantry issue, it is strongly recommended to consider the cooperation because of several benefits. Despite the fact that it might damage the establishment of Kenko’s own brand temporarily, the $4.5 million order could effectively help Kenko boost its sales and overcome 5 RT-Mart Company, “Company Overview,” http://www.rt-mart.com.cn, accessed November 2018
the financial problems, which means Kenko USA could invest more time to explore the U.s. market and make further adjustments. In addition, just as Rebecca mentioned, the partnership would help Americans to alternate rice crackers for snack. Although the brand is important, consumers would still be loyal to Kenko the crackers rather than Pattys the brand once Kenko USa being independent of Patty's. Definitely, the permanent benefit of adopting such model outweighs its temporary damage Second, owing to Pattys deal, the demand for rice crackers could be stimulated dramatically which would directly make Clementine's the retailer voluntarily move Kenko's product to a more popular position. Therefore, there are no more worries about paying a higher slotting fee. By doing so, the bosses of the management could thus be persuaded into this solution Third, as a Japanese subsidiary in America, the strategy of remaining its iconic packaging and the unique flavor is a peculiar selling point. It, however, forgoes the opportunity to launch its product into the mainstream from the Asian section. For the aim of sales growth, it is quite feasible for Kenko USA to improve the product itself. According to Specialty Food magazine, snack food names and packaging styles can have a significant impact on sales. For example, Angie's Kettle Corn changed its name to Boomchickapop and redesigned its package in 2012, and the companys sales grew 12-fold in the following four years. Consequently, both the design of package which Americans are more accustomed to, ie. packages with English brand name and instructions, and the new flavors specially designed with styles and tastes of both countries could better cater to local taste and win back their heart continuously. alternatively, Kenko USa could still remain a few iconic symbols on the package and keep wasabi flavor on shelves, which is beneficial to the establishment of its brand image. The two kinds of products then target at different customer groups, the iconic one staying in the asian section while the revised version attracting regular shoppers Last but not least, the ultimate purpose of a corporation is to stimulate its products consumption, and Kenko USA is no exception. On one side, a number of steps should be taken to maintain its existing customer's loyalty, such as membership system, special discount only for regular customers, and customization. On the other side, occupying a larger share of the market would stabilize its status in the U.S. market to a large extent. This could be done by taking advantages of publicity via social media to advertise the company, organizing free foretaste Joseperson,"newLogo:Angie'sBoomchickapop,,February22,2017,https://fadandfuture.wordpresscom/2017/02/22/new- logo-angies-boomchickapopl, accessed November 2018
5 the financial problems, which means Kenko USA could invest more time to explore the U.S. market and make further adjustments. In addition, just as Rebecca mentioned, the partnership would help Americans to alternate rice crackers for snack. Although the brand is important, consumers would still be loyal to Kenko the crackers rather than Patty’s the brand once Kenko USA being independent of Patty’s. Definitely, the permanent benefit of adopting such model outweighs its temporary damage. Second, owing to Patty’s deal, the demand for rice crackers could be stimulated dramatically, which would directly make Clementine’s the retailer voluntarily move Kenko’s product to a more popular position. Therefore, there are no more worries about paying a higher slotting fee. By doing so, the bosses of the management could thus be persuaded into this solution. Third, as a Japanese subsidiary in America, the strategy of remaining its iconic packaging and the unique flavor is a peculiar selling point. It, however, forgoes the opportunity to launch its product into the mainstream from the Asian section. For the aim of sales growth, it is quite feasible for Kenko USA to improve the product itself. According to Specialty Food magazine, snack food names and packaging styles can have a significant impact on sales. For example, Angie’s Kettle Corn changed its name to Boomchickapop and redesigned its package in 2012, and the company’s sales grew 12-fold in the following four years.6 Consequently, both the design of package which Americans are more accustomed to, i.e. packages with English brand name and instructions, and the new flavors specially designed with styles and tastes of both countries could better cater to local taste and win back their heart continuously. Alternatively, Kenko USA could still remain a few iconic symbols on the package and keep wasabi flavor on shelves, which is beneficial to the establishment of its brand image. The two kinds of products then target at different customer groups, the iconic one staying in the Asian section while the revised version attracting regular shoppers. Last but not least, the ultimate purpose of a corporation is to stimulate its products’ consumption, and Kenko USA is no exception. On one side, a number of steps should be taken to maintain its existing customer’s loyalty, such as membership system, special discount only for regular customers, and customization. On the other side, occupying a larger share of the market would stabilize its status in the U.S. market to a large extent. This could be done by taking advantages of publicity via social media to advertise the company, organizing free foretaste 6 Joseperson, “New Logo: Angie’s Boomchickapop,”, February 22, 2017, https://fadandfuture.wordpress.com/2017/02/22/newlogo-angies-boomchickapop/, accessed November 2018
activities, and inviting celebr ities to be endorsement ambassadors. All of these measures could contribute to exponential sales growth Part 5: Conclusion According to relevant case information and concrete assessment, it is recommended for Kenko USA to cooperate with Patty's Pantry and make certain adjustments to its products. The sales growth after partnership could naturally solve the insufficient demand, and Kenko's crackers could be able to move to a more popular position, which generates considerable profits for the company Adjustments to the new version of products would boost its sales while the former one could still attract a small group of customers. Overall, once the company gets rid of the unsatisfactory situation, Riku could be back to their homeland with his family and take charge of Kenko USA overseas to discuss the following operations 倪鲲,顾美玪,王琦.“进口零食消费市场特点的分析和建议", China business& Trade, October,2016 http://www.wanfangdata.com.cndetailsdetail.dotype=perio&id=zhonggsm201630001,accessedNovember2018
6 activities, and inviting celebrities to be endorsement ambassadors. All of these measures could contribute to exponential sales growth7 . Part 5: Conclusion According to relevant case information and concrete assessment, it is recommended for Kenko USA to cooperate with Patty’s Pantry and make certain adjustments to its products. The sales growth after partnership could naturally solve the insufficient demand, and Kenko’s crackers could be able to move to a more popular position, which generates considerable profits for the company. Adjustments to the new version of products would boost its sales while the former one could still attract a small group of customers. Overall, once the company gets rid of the unsatisfactory situation, Riku could be back to their homeland with his family and take charge of Kenko USA overseas to discuss the following operations. 7 倪鲲, 顾美玲, 王琦. “进口零食消费市场特点的分析和建议,”, China Business & Trade, October, 2016, http://www.wanfangdata.com.cndetailsdetail.do_type=perio&id=zhonggsm201630001, accessed November 2018